Investing 102

[dhutton]

Originally Posted by GregWeld

Thus my post today... HOPEFULLY this thread - if it's done nothing else - has taught you to take a far longer term approach to your investing. Are we investing for what might happen 6 months from now - or are we investing for 20 YEARS from now??

Hi Greg. Does this approach change at some point relative to retirement age or do you advocate this same strategy well into retirement?

Thanks,
Don

[GregWeld]

Originally Posted by dhutton

Hi Greg. Does this approach change at some point relative to retirement age or do you advocate this same strategy well into retirement?

Thanks,
Don

Don -- The old school used to say that as you approach retirement age -- that you should switch to bonds. The reason behind this was that you wouldn't or "shouldn't" loose capital in a down market. Great. NOT. People used to retire at 65 and maybe live to 75.... now that standard is out the window. People live for YEARS and YEARS now. My Mother in Law is 90 and still going strong!

So here's always been my point about this - and I've been retired for 23 years now (I'll be 62 this summer). If a strategy that worked well enough to get me to retirement - which may have taken years - why would I change that? It might have taken 25 or 30 years to get enough of a nest egg that would see me thru retirement.... and perhaps I have ANOTHER 25 years of life left!! I sure hope so!! 65 to 90 is 25 years! Will there be ups and downs in my portfolio over that time? Hell yes! Many of them. But if I've followed the plan --- I'm living off the dividend strategy -- not the capital. Oh - and by the way - that capital should have grown many fold over the time I've been investing. So if I've got 300% more than I put in -- and it's down 20% -- who cares?!?!? I'm not spending (or selling) all of my capital "this year" (the year or two or three when it's down from the HIGH).

The key to happy retirement is to have your spending "in check" -- there just shouldn't be much outgo... and your Social Security should only be a supplement to your real income from your investments... and the dividends should have grown over time from when you first bought "X". Maybe the actual dividend percentage being paid on your original investment is now 20% or more!! Say you bought at $50 and it paid 5% ($2.50 per year dividend) and now 20 years later it's paying you $4.00 per year in dividends. That's now paying you 8%.... and think about this as well.... it's been paying you $2.50 or better per year for 20 years --- at a steady rate of $2.50 for 20 years that's all of your money back ($50 in total dividends per share!). Hopefully you choose to re-invest the dividend all those 20 years and you now have a bunch more shares than you started with.

Here's a real life scenario --- that just happened to close this week. In 2005 I invested $200,000 in an apartment LLC (Limited Liability Corp). The dividend paid was 7% ($14,000 per year).... "We" just sold this property and my net cash out is $655,000. So in 10 years I collected $140,000 in dividends - and I got a net (gross actually) check for $675,000. Now - if I get a call next week from the same group and they ask me to buy into another apartment.... would I say "F" you! I'm retired!? Let me do the math - in 10 more years I'll be 72 - I hope to still be racing with Charlie.... and maybe if this new investment works as well as the last one did -- I'll get a check for 1.5 million (investing $500,000 in the new deal) and the $500,000 at 6% will be paying me $30 grand a year...

So I ask you.... should I change my strategy??? Or should I buy another race car?

[WSSix]

Option C. BOTH!

[dhutton]

Originally Posted by GregWeld

Don -- The old school used to say that as you approach retirement age -- that you should switch to bonds. The reason behind this was that you wouldn't or "shouldn't" loose capital in a down market. Great. NOT. People used to retire at 65 and maybe live to 75.... now that standard is out the window. People live for YEARS and YEARS now. My Mother in Law is 90 and still going strong!

So here's always been my point about this - and I've been retired for 23 years now (I'll be 62 this summer). If a strategy that worked well enough to get me to retirement - which may have taken years - why would I change that? It might have taken 25 or 30 years to get enough of a nest egg that would see me thru retirement.... and perhaps I have ANOTHER 25 years of life left!! I sure hope so!! 65 to 90 is 25 years! Will there be ups and downs in my portfolio over that time? Hell yes! Many of them. But if I've followed the plan --- I'm living off the dividend strategy -- not the capital. Oh - and by the way - that capital should have grown many fold over the time I've been investing. So if I've got 300% more than I put in -- and it's down 20% -- who cares?!?!? I'm not spending (or selling) all of my capital "this year" (the year or two or three when it's down from the HIGH).

The key to happy retirement is to have your spending "in check" -- there just shouldn't be much outgo... and your Social Security should only be a supplement to your real income from your investments... and the dividends should have grown over time from when you first bought "X". Maybe the actual dividend percentage being paid on your original investment is now 20% or more!! Say you bought at $50 and it paid 5% ($2.50 per year dividend) and now 20 years later it's paying you $4.00 per year in dividends. That's now paying you 8%.... and think about this as well.... it's been paying you $2.50 or better per year for 20 years --- at a steady rate of $2.50 for 20 years that's all of your money back ($50 in total dividends per share!). Hopefully you choose to re-invest the dividend all those 20 years and you now have a bunch more shares than you started with.

Here's a real life scenario --- that just happened to close this week. In 2005 I invested $200,000 in an apartment LLC (Limited Liability Corp). The dividend paid was 7% ($14,000 per year).... "We" just sold this property and my net cash out is $675,000. So in 10 years I collected $140,000 in dividends - and I got a net (gross actually) check for $675,000. Now - if I get a call next week from the same group and they ask me to buy into another apartment.... would I say "F" you! I'm retired!? Let me do the math - in 10 more years I'll be 72 - I hope to still be racing with Charlie.... and maybe if this new investment works as well as the last one did -- I'll get a check for 1.5 million (investing $500,000 in the new deal) and the $500,000 at 6% will be paying me $30 grand a year...

So I ask you.... should I change my strategy??? Or should I buy another race car?

Thanks Greg. Great advice as usual.

Don

[NOVA]

Originally Posted by GregWeld

Don -- The old school used to say that as you approach retirement age -- that you should switch to bonds. The reason behind this was that you wouldn't or "shouldn't" loose capital in a down market. Great. NOT. People used to retire at 65 and maybe live to 75.... now that standard is out the window. People live for YEARS and YEARS now. My Mother in Law is 90 and still going strong!

So here's always been my point about this - and I've been retired for 23 years now (I'll be 62 this summer). If a strategy that worked well enough to get me to retirement - which may have taken years - why would I change that? It might have taken 25 or 30 years to get enough of a nest egg that would see me thru retirement.... and perhaps I have ANOTHER 25 years of life left!! I sure hope so!! 65 to 90 is 25 years! Will there be ups and downs in my portfolio over that time? Hell yes! Many of them. But if I've followed the plan --- I'm living off the dividend strategy -- not the capital. Oh - and by the way - that capital should have grown many fold over the time I've been investing. So if I've got 300% more than I put in -- and it's down 20% -- who cares?!?!? I'm not spending (or selling) all of my capital "this year" (the year or two or three when it's down from the HIGH).

The key to happy retirement is to have your spending "in check" -- there just shouldn't be much outgo... and your Social Security should only be a supplement to your real income from your investments... and the dividends should have grown over time from when you first bought "X". Maybe the actual dividend percentage being paid on your original investment is now 20% or more!! Say you bought at $50 and it paid 5% ($2.50 per year dividend) and now 20 years later it's paying you $4.00 per year in dividends. That's now paying you 8%.... and think about this as well.... it's been paying you $2.50 or better per year for 20 years --- at a steady rate of $2.50 for 20 years that's all of your money back ($50 in total dividends per share!). Hopefully you choose to re-invest the dividend all those 20 years and you now have a bunch more shares than you started with.

Here's a real life scenario --- that just happened to close this week. In 2005 I invested $200,000 in an apartment LLC (Limited Liability Corp). The dividend paid was 7% ($14,000 per year).... "We" just sold this property and my net cash out is $675,000. So in 10 years I collected $140,000 in dividends - and I got a net (gross actually) check for $675,000. Now - if I get a call next week from the same group and they ask me to buy into another apartment.... would I say "F" you! I'm retired!? Let me do the math - in 10 more years I'll be 72 - I hope to still be racing with Charlie.... and maybe if this new investment works as well as the last one did -- I'll get a check for 1.5 million (investing $500,000 in the new deal) and the $500,000 at 6% will be paying me $30 grand a year...

So I ask you.... should I change my strategy??? Or should I buy another race car?

Greg - wouldn't a person need to set up something like this to do what you are doing in this scenario or no ? http://www.sensefinancial.com/servic...o-401k-basics/ ..... if nothing else kind of an interesting site.

[GregWeld]

Originally Posted by NOVA

Greg - wouldn't a person need to set up something like this to do what you are doing in this scenario or no ? http://www.sensefinancial.com/servic...o-401k-basics/ ..... if nothing else kind of an interesting site.

In our personal situation - "retirement" accounts don't make any sense. I've already BEEN retired 23 years... Gwen has retired TWICE... and she's younger than I am. So the point it - in a retirement account we'd have money tied up that we'd have no access too. Having said that we do have them and they're 7 figure accounts... but that's because they were well invested and have been for many years.


Now --- You have to be really really careful about buying REAL ESTATE investments AKA "passive" investments inside a retirement account. I have done that - mistakenly - and that IRA had to file an income tax form every year and pay taxes. I'm not a "tax" guy... Taxes are way too complicated for my feeble brain - and my stuff if far far too complicated (last years filing was almost 200 pages!). So I stay away from stuff I don't understand as I've made that mistake in the past.

The other thing is -- DIVIDENDS -- are taxed at 20%. They're NOT "earned income" or interest... and the LLC's I've invested in are DIVIDEND paying set ups. That -- and much of the income - if not all of it - is offset by the DEPRECIATION that you get (again - complicated and much more to it than meets the eye). I first got into real estate LLC's via my tax accountant... so since he put his money where his mouth is - and understood our situation - if he said I should do it - I did. Other than that.... I'm an idiot about most of it. The part I do know -- every one of them has worked out in OMG fashion... OMG as in GREAT.

[GregWeld]

Thought of something this morning while reading the "business news". The headline says the US stock market follows Europe down over the Greek debt issue.


I thought to myself.... REALLY? So McDonalds and Coke and Caterpillar are going to be sold off because "WE" are worried about whether or not the Greeks can pay their bills. You know what.... I didn't get up this morning and change a single thing I'm doing or planning based on this kind of info. Frankly - I could care less if they're in or out of the whole "euro" currency thing - because I don't care about the "euro" - who's in it or what it's even all about.

What I do care about is whether or not the businesses I'm investing in are paying their bills - whether or not their sales are higher going forward - and what their willing to share with me as a stockholder. I looked around and didn't see a single company that I'm in that was dependent on Greece for their business.

What's my point?? The point is that the "news" can drive you crazy.... which is why I call them "talking heads". 10 years from now we won't even remember who Greece is let alone whether they "reformed" or not. It's like discussing a pimple. Greece isn't China. I'll get worried when China can't pay it's bills.

[SBDave]

Embarrassingly I've known about this thread since it began and something recently sparked me to start reading it. I've read through page 57 over the last couple days.... which is interesting because I can see the advice and discussions and then what happened in the market following the discussions.

What is your advice on getting caught up on the thread? I can slowly work my way through all 500 pages but that'll take some time.

I need to refine my own investments and feel like I'm in a very good position to use the lessons in this thread. I'm 31 and have a 401K, ROTH 401K, ROTH IRA, HSA, a managed portfolio as well as other mutual funds and am a partner in a craft brewery.
I've been wanting to get into real estate but my location makes it somewhat prohibitive (Santa Barbara, CA).

Thanks!
Dave

[Flash68]

Originally Posted by SBDave

am a partner in a craft brewery.
I've been wanting to get into real estate but my location makes it somewhat prohibitive (Santa Barbara, CA).

Thanks!
Dave

Nice! Which one?

[NOVA]

Originally Posted by GregWeld

In our personal situation - "retirement" accounts don't make any sense. I've already BEEN retired 23 years... Gwen has retired TWICE... and she's younger than I am. So the point it - in a retirement account we'd have money tied up that we'd have no access too. Having said that we do have them and they're 7 figure accounts... but that's because they were well invested and have been for many years.


Now --- You have to be really really careful about buying REAL ESTATE investments AKA "passive" investments inside a retirement account. I have done that - mistakenly - and that IRA had to file an income tax form every year and pay taxes. I'm not a "tax" guy... Taxes are way too complicated for my feeble brain - and my stuff if far far too complicated (last years filing was almost 200 pages!). So I stay away from stuff I don't understand as I've made that mistake in the past.

The other thing is -- DIVIDENDS -- are taxed at 20%. They're NOT "earned income" or interest... and the LLC's I've invested in are DIVIDEND paying set ups. That -- and much of the income - if not all of it - is offset by the DEPRECIATION that you get (again - complicated and much more to it than meets the eye). I first got into real estate LLC's via my tax accountant... so since he put his money where his mouth is - and understood our situation - if he said I should do it - I did. Other than that.... I'm an idiot about most of it. The part I do know -- every one of them has worked out in OMG fashion... OMG as in GREAT.

Thanks for your reply on this Greg